The number of approved houses has fallen to their lowest level in over a decade, indicating the impact of rate hikes on the housing market.
Figures from the Australian Bureau of Statistics showed a 27.6% decline in the total number of dwellings January.
Approvals for houses fell for the fifth consecutive month, down 13.8% to reach the lowest result recorded since June 2012. Meanwhile, approvals for apartments and units declined 40.8%.
These declines followed the increase reported in December.
Overall, building approvals were down in almost all jurisdictions in the first month of 2023, with the declines led by New South Wales (49%), Victoria (38.6%), Tasmania (31.7%), Western Australia (7.9%), and South Australia (6.5%).
Of all states, Queensland saw the only increase for the month in seasonally adjusted terms, up by 25.6%.
Experts express concern
HIA senior economist Tom Devitt said the higher cash rate is compounding the adverse impact of the rising cost of materials, labour, and land as well as the increased costs of compliance with the building code.
“This will not be the end of the decline in approvals. The adverse impact of last year’s cash rate increases is still to fully flow through to the official data,” he said.
“If the RBA continues to raise rates, they do risk a longer and deeper slowdown in economic growth than is necessary in this cycle.”
Master Builders Australia CEO Denita Wawn said this latest showing in approvals show that more needs to be done to address supply barriers and to speed up the delivery of new homes and attract investment.
“Without sensible fiscal levers being pulled, we are seeing the negative consequences of rising interest rates playing out,” she said.
Ms Wawn the approvals for detached housing have already fallen well below pre-pandemic levels.
“Insufficient supply of titled residential land, high developer charges, and inflexible planning laws are preventing new home building projects from getting off the starting blocks,” she said.
On top of this, Ms Wawn said the drastic decline in unit approvals spells bad news for the rental market.
“Over the long-term high density home building is still playing catch-up,” she said.
“The latest inflation figures show growing pressures in the rental market and without a strong pick up in apartments and units entering the pipeline, this will be difficult to neutralise.”
High inflation is also threatening the sales market — builders, Ms Wawn said, are already seeing evidence of declining sales.
“The pain of higher interest rates and high inflation is real and if we do not get it under control we could be in for a lengthy period of pain and depressed construction activity,” she said.
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